Earnings call transcript: IQVIA Holdings beats Q1 2025 EPS forecast, stock dips

IQVIA Holdings Inc. reported its first-quarter 2025 earnings, showcasing a robust financial performance with adjusted earnings per share (EPS) of $2.70, surpassing the forecast of $2.64. The company also reported revenue of $3.83 billion, exceeding the expected $3.78 billion. Despite these positive results, IQVIA's stock experienced a slight decline of 0.82% in pre-market trading, closing at $152.30. According to InvestingPro analysis, IQVIA appears undervalued based on its Fair Value calculations, with the stock currently trading at a P/E ratio of 20.2x.

Key Takeaways

• IQVIA reported a 6.3% year-over-year increase in adjusted EPS.
• Revenue for Q1 2025 grew by 2.5% reported and 3.5% at constant currency.
• The company raised its full-year revenue guidance to $16.0-$16.4 billion.
• Stock price decreased by 0.82% following the earnings report.
• Strong free cash flow and significant share repurchases.

Company Performance

IQVIA Holdings Inc. demonstrated solid performance in the first quarter of 2025, with both revenue and EPS surpassing analyst expectations. The company achieved a revenue increase of 2.5% year-over-year, driven by strategic acquisitions and strong operational execution. Despite the absence of COVID-related revenue, IQVIA's diversified portfolio and leadership in the real-world evidence market have positioned it well in the biopharmaceutical sector, which remains a strategic focus.

Financial Highlights

• Revenue: $3.83 billion, up 2.5% year-over-year
• Adjusted EBITDA: $883 million, a 2.4% increase from the previous year
• Adjusted diluted EPS: $2.70, a 6.3% increase year-over-year
• Free cash flow: $426 million

Earnings vs. Forecast

IQVIA exceeded earnings expectations with an adjusted EPS of $2.70, compared to the forecasted $2.64. This represents a positive surprise of approximately 2.3%. Revenue also surpassed projections, coming in at $3.83 billion against a forecast of $3.78 billion. This performance marks a continuation of IQVIA's trend of exceeding market expectations, reflecting effective cost optimization and strategic growth initiatives.

Market Reaction

Despite the earnings beat, IQVIA's stock saw a minor decline of 0.82% in pre-market trading, settling at $152.30. The stock remains within its 52-week range, with a high of $252.88 and a low of $135.97. The modest dip may reflect broader market trends or investor caution amid economic uncertainties. Notably, analysts maintain a bullish outlook with a consensus "Buy" recommendation, though 6 analysts have recently revised their earnings expectations downward for the upcoming period.

Outlook & Guidance

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IQVIA raised its full-year revenue guidance to a range of $16.0 to $16.4 billion, indicating confidence in its growth trajectory. The company reaffirmed its adjusted EBITDA guidance of $3.765 to $3.885 billion and expects a 5% growth rate for the year. Strategic initiatives include scaling AI deployments and expanding partnerships, which are anticipated to drive future performance.

Executive Commentary

CEO Ari Bousvi expressed optimism about the company's ability to navigate market uncertainties, stating, "We are confident that our industry will successfully manage this period of uncertainty and we'll find ways to adapt." He also highlighted the resilience of the life sciences industry, emphasizing its capacity to thrive despite macroeconomic challenges.

Risks and Challenges

• Regulatory changes: Potential impacts from evolving U.S. government initiatives could affect the biopharmaceutical landscape.
• Market saturation: Increased competition in the real-world evidence market may pressure margins.
• Economic uncertainties: Macro factors, such as inflation or interest rate changes, could impact investment and spending in the sector.
• Supply chain disruptions: Ongoing global supply chain issues could affect operations and costs.
• R&D fluctuations: Variability in R&D spending and decision-making processes may influence future growth.

Q&A

During the earnings call, analysts inquired about the uncertainty in the R&D Solutions market and the company's strategic response to U.S. government initiatives. IQVIA's management addressed these concerns by emphasizing its diversified service offerings and strategic partnerships, which are expected to mitigate potential impacts.

Overall, IQVIA Holdings Inc. delivered a strong first-quarter performance, exceeding earnings expectations and demonstrating resilience in a challenging market environment. With an InvestingPro Financial Health Score rated as "GOOD" and its position as a prominent player in the Life Sciences Tools & Services industry, IQVIA shows promising potential. For comprehensive analysis including Fair Value estimates, financial health metrics, and expert insights, explore the detailed Pro Research Report available on InvestingPro .

Full transcript - IQVIA Holdings Inc (IQV) Q1 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the IQVIA First Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. As a reminder, this call is being recorded.

I would now like to turn the call over to Cary Joseph, Senior Vice President, Investor Relations and Treasury. Mr. Joseph, please begin your conference.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA: Thank you, operator. Good morning, everyone. Thank you for joining our first quarter twenty twenty five earnings call. With me today are Ari Bousvi, Chairman and Chief Executive Officer Ron Broman, Executive Vice President and Chief Financial Officer Eric Sherber, Executive Vice President and General Counsel Mike Fiedock, Senior Vice President of Financial Planning and Analysis and Gustavo Peroni, Senior Director of Investor Relations. Today, we will be referencing a presentation that will be visible during this call for those of you on our web cast.

This presentation also will be available following this call in the Events and Presentations section of our IQVIA Investor Relations website at ir.acuvia.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward looking statements. Actual results could differ materially from those stated or implied by forward looking statements to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10 ks and subsequent SEC filings. In addition, we will discuss certain non GAAP financial measures on this call, which should

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: be considered a supplement to

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA: and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our Chairman and CEO, Ari Lucey. Thank you, Gary, and good morning, everyone.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Thank you for joining us today to discuss our first quarter results. I'm going to start with the usual update on financial performance for the quarter. I'll then provide perspectives on the market, including our understanding of the possible effects of recent U. S. Government initiatives, how we are well positioned to navigate these near term challenges, and finally why we remain confident about the industry's resilience and prospects.

I'll close by highlighting a few important wins in the first quarter. So let's get started. We delivered strong revenue and profit results at the high end of our expectations despite a continued challenging environment in R and D and S. Total revenue for the first quarter came in above the high end of our guidance range, representing year over year growth of 2.5% on a reported basis and 3.5% at constant currency. And compared to last year and excluding COVID related work from both periods, we grew the top line about 4.5% on a constant currency basis including about a couple of points of contribution from acquisitions.

First quarter adjusted EBITDA increased 2.4%. First quarter adjusted diluted EPS of 2.7 increased 6.3% year over year. Let me share some details on the market landscape and the demand metrics we're seeing for each segment. Starting with us, the business continued the strong recovery trend we saw exiting last year as our clients are launching new drugs and are executing on their commercial road maps. It is in times like these where there is some uncertainty in the biopharmaceutical sector that we clearly see the value of the scale, diversification and differentiation of IQVIA's portfolio of offerings.

It's great that TAZ is contributing over 40% of our revenue. TAZ revenue growth actually came in above our expectations at 6.4% reported and 7.6% at constant currency, led by double digit growth in real world evidence. On the clinical side, as we expected, the near term market environment continues to be bumpy. We experienced delayed decision making by customers on new programs, reflecting the heightened macroeconomic and industry sector caution. In fact, our average time from RFP issuance to award in the quarter increased by approximately 10% both year over year and sequentially.

We believe that this is the result of the sector uncertainty caused by the pronouncements of the new administration, the precise effects of which are unknowable at this point. Several of our clients are slowing or reevaluating programmatic decisions until there is better visibility. Also reflecting these same concerns, the funding environment especially for early stage, has deteriorated. While the R and D S business is experiencing some turbulence, our demand metrics remain positive. Our backlog reached a new record of $31,500,000,000 at the end of the quarter, growing 4.8% compared to the prior year.

Our first quarter RFP flow improved mid single digits year over year and high single digits sequentially. Our qualified pipeline is up low single digits year over year, driven mostly by good growth in large pharma. Now obviously, the demand environment is impacted by the proposed changes that have been signaled by the new U. S. Administration.

The White House's initiatives relative to our industry sector can be grouped into three categories: tariffs agency actions, particularly HHS and FDA related and drug pricing. Starting with tariffs, when the President announced plans to initiate the reciprocal tariff program, the pharmaceutical industry received certain exemptions. However, following the announcement, the Department of Commerce began a national security investigation of the life sciences industry, which may result in tariffs specific to the pharma sector. Now IQVIA's direct exposure to tariffs is limited primarily to certain supplies in our laboratory business and is immaterial financially. We understand that industry specific tariffs, if implemented, may have a more direct impact on our customers.

However, it is too early to assess what that impact may be. With respect to agency actions, HHS announced a number of initiatives, including NIH delays and cancellations of government contracts, along with establishing a 15% cap on indirect costs. Now to be clear, IQVIA has no clinical trial contracts with BARDA and no COVID-nineteen contract sponsored by the government. So our exposure there is zero. That said, we have excellent relationships with these agencies, including BARDA.

TAL does have a minimal amount of business with the government, and we do not expect any of this to have any impact at all. The NIH funding cap relates to indirect administrative and overhead costs. It aims at aligning those indirect costs to the same levels as private foundations. This has no impact on direct costs for research funding and therefore zero impact on us. Regarding the FDA, there have been numerous restructuring actions announced, which have impacted a significant portion of the workforce.

These reductions in force primarily targeted overhead and support functions such as planning, training, travel, communications and records management. Importantly, core product review teams responsible for evaluating new drugs, vaccines and medical devices, which are primarily funded by the industry, were largely preserved to maintain the FDA's essential regulatory functions. To date, we have no evidence of any trial or approval delays. Whatever anecdotal disruptions there may be in non approval related interactions with FDA staff, we expect this to normalize. FDA Commissioner, MacKerry, has announced his intention to reduce animal testing in favor of AI based models and enhance usage of real world evidence in the approval process.

We applaud this and we see these actions proposed by Commissioner Macquarie as benefiting our industry. They will enable clients to move prospects faster into clinical trials. The increased use of real world evidence not only in preclinical work, but also in Phase II and Phase III trials plays to IQVIA's strengths. Ultimately, this is positive news for EVP companies, which develop over 50% of the drugs in clinical trials. Finally, drug pricing.

The U. S. Administration recently issued an executive order regarding the role of PBMs, pricing transparency and Medicare costs. These initiatives are still in their early stages and some provisions may require rational approval. The impact of these potential actions is difficult to ascertain at this point because the specifics have not been determined.

But there are two aspects that could actually be very positive for the industry. First, the proposal to do away with the so called pill penalty provision in the IRA, which subject small molecule drugs to CMS pricing review after only nine years versus thirteen years for large molecule drugs. This is key for Pharma clients as 50%, fifty % of the drug's value is realized in years nine to thirteen. Second, the focus on drug pricing, treatment value and comparative effectiveness drives the need for earlier clinical results and more real world evidence. So in summary, some of our customers have slowed down their decision making processes as you would expect, And we experienced delays in RFPs moving to contracts in the first quarter.

An unusually high number of EVP awards that were contracted in the quarter were not included in our bookings because funding had not been secured yet. Now we are confident that our industry will successfully manage this period of uncertainty and we'll find ways to adapt. The life sciences industry has consistently demonstrated its resilience, overcoming macroeconomic obstacles and thriving in changing environments, and IQVIA is particularly well positioned to navigate this marketplace. We believe when everything is said and done, key decision makers will recognize the industry is a strategic sector for The U. S.

That deserves to be strongly supported. U. S. Companies in the biopharmaceutical sector have maintained strong global leadership in biomedical discovery and clinical research. Our sector serves as an extraordinary engine of innovation.

It was responsible for 46% of the six thirty four novel drugs approved globally over the past decade, confirming strong U. S. Leadership. The U. S.

Is responsible for 61 of global pharmaceutical sales of branded drugs, which is up from 56% a decade ago. The sector invests almost $200,000,000,000 annually in research and development and drives economic growth contributing $1,650,000,000,000 of economic output annually. It supports direct and indirect employment of highly skilled, highly educated workers and growing nearly 5,000,000 people at an average of $157,000 annually, which is double the national average. In fact, many non U. S.

Large pharma companies have moved their primary R and D centers to The U. S. To take advantage of the talent pool. And of course, the biopharmaceutical industry provides substantial societal benefits by improving health outcomes and extending life expectancy. Now before I turn it over to Ron, let me give you a little bit of color on business activity in the quarter, and I'll be brief here and just mention a few sales examples.

As the revenue numbers show, Taz did quite well in the quarter. We won a number of partnerships with clients that are launching new products. For example, the last project for an important EVP client that's launching their first product and the first ever treatment for low grade serous ovarian carcinoma. We also won a launch partnership with another EVP, leveraging our AI powered patient relationship manager platform for a groundbreaking treatment for a rare condition in an underserved patient community. We were selected to support a midsized pharma client with an omnichannel campaign that includes KPIs designed to improve patient engagement.

Our commercial technology suite continues to be successful in the marketplace. Our award winning SmartSolve offering, which is a proprietary quality management system, displays the incumbent at an EVP client. In the MedTech space, we secured a significant contract to deploy an integrated information solution to help our clients stream our operations and the decision making. Let me skip a few more of these and move to R and D. We achieved notable wins across customer segments.

As you recall, last year, we renewed all 22 of our strategic partnerships with large pharma clients, and we expanded the scope in half a dozen of them. We are being awarded significant contracts from these partnerships. For example, in the quarter, a top five pharma clients that have selected IQVIA as a preferred partner awarded us four early stage studies under the new model. IQVIA was selected by a top 20 pharma client to support a Phase III obesity program across eight studies. Our best in class clinical trial technology solutions and industry leading expertise were key factors in securing this deal.

The top 10 pharma clients selected IQVIA's pharma provision offerings to achieve a significant reduction in case processing time, enable efficiency and manage the increasing volume. We secured a contract with EDP client to run a Phase II trial for an innovative treatment for patients with probably hypertension associated with interstitial lung disease. The customer selected IQVIA due to our deep technology expertise, delivery model and partnership focused approach. Lastly, Mike mentioned our progress with AI. You may recall we announced our collaboration with NVIDIA earlier in the call.

We are progressing as planned to deploy highly specialized industry AI agents. So far, we moved over 20 agents into production, covering three use cases in each of the commercial, real world and R and D segments. We are seeing positive results and productivity gains in areas where these AI agents have been deployed. For example, one agentic system in commercial allows us to reduce delivery time by two thirds from twelve weeks to four weeks with a net 30% cost reduction. We plan to scale up from these three use cases to 12 by the end of the second quarter and 40 use cases by the end of the year.

And now to Ron for more details on our financial performance.

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: Thanks, Ari, and good morning, everyone. Let's start by reviewing revenue. First quarter revenue of $3,829,000,000 grew 2.5% on a reported basis and 3.5% at constant currency. In the quarter, we had virtually no COVID related revenue versus over $40,000,000 in last year's first quarter. Adjusting for this COVID step down, constant currency growth was about 4.5%.

As already mentioned, acquisitions contributed approximately two points of this growth, the majority of this in the TAD segment. Technology and Analytics Solutions revenue for the first quarter was $1,546,000,000 That was up 6.4% reported and 7.6% constant currency. R and D Solutions first quarter revenue was $2,102,000,000 up 0.3% reported and 1.1% constant currency. Excluding COVID related work, R and DS revenue grew approximately 3% constant currency. Finally, contract sales and medical solutions first quarter revenue of $181,000,000 declined 4.2% reported and 2.1% at constant currency.

Moving down the P and L, adjusted EBITDA was $883,000,000 for the quarter. That was growth of 2.4% year over year. First quarter GAAP net income was $249,000,000 and GAAP diluted earnings per share was $1.4 Adjusted net income was $479,000,000 for the first quarter, up 2.4% year over year, and adjusted diluted earnings per share grew 6.3% to $2.7 R and D and backlog at March 31 was 31,500,000.0 billion dollars, an increase of 4.8% year over year and 4.6% constant currency. Next twelve months revenue from this backlog is $7,900,000,000 Reviewing the balance sheet. As of March 31, cash and cash equivalents totaled $1,740,000,000 and gross debt was $14,330,000,000 resulting in net debt of $590,012,000 Our net leverage ratio ended the quarter at 3.40x trailing twelve month adjusted EBITDA.

First quarter cash flow from operations was $568,000,000 and CapEx was $142,000,000 resulting in strong free cash flow of $426,000,000 In the quarter, we repurchased $425,000,000 of our shares. This leaves us with approximately $2,600,000,000 remaining under the current program. K. Let's turn to guidance now. You saw we're raising our full year revenue guidance by $275,000,000.

This to reflect more favorable foreign currency exchange rates since we last guided. We now expect revenue to be between $16,000,000,000 and $16,400,000,000, which represents year over year growth of 3.9% to 6.5% on a reported basis or 5.2% growth at the midpoint. This guidance now includes a year over year FX tailwind of approximately 50 basis points compared to about 150 basis points of headwind in our previous guidance. We continue to assume approximately $100,000,000 of step down in COVID related work and about 150 basis points of contribution from M and A activity for the full year. We are reaffirming our adjusted EBITDA guidance of $3,765,000,000 to $3,885,000,000 as FX changes had a negligible impact on EBITDA.

This represents year over year growth of 2.2% to 5.5%. We're also reaffirming our adjusted diluted EPS guidance, which continues to be $11.70 to $12.10. That's up 5.1 to 8.7 versus the prior year or 6.9% growth at midpoint. Now let's go through the second quarter guidance. For the second quarter, we expect revenue to be between 3,000,000,900 and $25,000,000 and $4,000,000,000 Adjusted EBITDA is expected to be between $895,000,000 and $915,000,000 and adjusted diluted EPS to be between $2.72 and $2.83 Both this guidance for the second quarter and our full year guidance assume that foreign currency rates as of May 5 continue for the balance of the year.

So to summarize, in Q1, we delivered strong revenue and profit results at the high end of our expectations. We had a very solid free cash flow of 89% of adjusted net income. The cash business continued to achieve above target performance with revenue growth of 7.6% at constant currency, and RMBS of bookings were affected by delayed decision making by customers on new programs and lower EDP funding, reflecting incremental macroeconomic and industry sector uncertainty. That said, forward looking indicators for our RMBS offerings, such as qualified pipeline, RFP flow, and backlog continue to grow. We're progressing as planned to deploy new highly specialized industry AI agents, and we've identified a reporting use cases and scaled up, deploying it across our portfolio in 2025.

In the quarter, we repurchased 425,000,000 of our shares. And lastly, we raised our full year revenue guidance by $275,000,000 to reflect changes in FX, and, of course, we reaffirmed our past guidance. So with that, let me hand it back over to the operator to open the session for questions and answers.

Mike Fiedock, Senior Vice President of Financial Planning and Analysis, IQVIA: Hello? Operator?

Conference Operator: I apologize. I was muted. Yes. And we'll take our first question from Justin Bowers at Deutsche Bank.

Justin Bowers, Analyst, Deutsche Bank: Ari, could you discuss some of the drivers behind the strength in RWE in the quarter, how the order book looks for the balance of the year and whether or not this outperformance is durable?

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Thank you, Justin. Look, TAS delivered better than expected revenue growth, which is what helped the company deliver above the high end of our guidance with 7.6% of constant currency. And as I mentioned, this was driven largely by the strong growth in real world, which was strong double digits. This basically you will recall that real world has declined. The part of real world that's discretionary has essentially shut down.

And in the end of twenty twenty three, beginning of '20 '20 '4 timeframe. And the rest of the real world business, which is more mission critical, has been delayed and pushed to the right in terms of when to do it and so on. So both the discretionary piece and the required work that's necessary to support safety or pricing, demonstrating the effectiveness of treatments, etcetera, both have returned. There's pent up demand and we expect this based on the book of business to continue. The rest of Taz was also good, basically low to mid single digits for the different other aspects of the business.

Thank you, Justin.

Justin Bowers, Analyst, Deutsche Bank: Thank you.

Conference Operator: We'll move next to Matt Sykes at Goldman Sachs.

Justin Bowers, Analyst, Deutsche Bank: Thanks for taking my question. Ron, just maybe on the margin side, know you guys had called out in Q4 twenty basis point potential margin expansion. It looks like as you kind of rearrange the guide, maybe not expecting that. Could you just maybe talk about the opportunities for any potential margin expansion and kind of what you could do on the cost side to help achieve that?

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: Yeah. Well, one thing I would point out, Matt, when you're looking at the margin versus our previous guidance, obviously, the impact of FX because FX affects our top line, but doesn't have much impact on the bottom line. And if you're looking for its margins or EBITDA margins as the dollar is weak and and revenue was going up, profit hasn't followed. So that that really explains all the change in our implied margins versus, what we guided to previously. Now, you know, if you're if you're if you're looking towards what can help drive margins going forward, it it it's always cost reduction where, you know, AI would be one example that we're looking at.

We're always looking at taking cost out across the organization. That's an ongoing effort. You'll see that in our restructuring expense. You know,

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: of course,

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: against that, you know, we do have pressures on on things like not just the FX, but mix has gone against us to a certain extent. You'll see that in the gross margin. And, you know, that mix includes, for instance, the shift towards FSP, which hurts margins a little bit. But net net, the margin picture really hasn't changed that much. What you're seeing is mostly just the impact of FX, almost entirely.

Justin Bowers, Analyst, Deutsche Bank: Got it. Thank you. And just for a follow-up, Ari, could you just maybe talk a little bit about on a longer term basis, you made a comment in Q3 regarding sort of the competitiveness of RFPs going from sort of one of 13 to one of four if I've got the numbers correctly. And just in this environment, given sort of lower levels of demand, how do you feel about your position? And do you think that vendor consolidation trend, which has already been in place, will accelerate in this environment?

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Are you talking about the RDS business and RFP flow?

Justin Bowers, Analyst, Deutsche Bank: R RDS specifically. Yep. And vendor consolidation. Yeah.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Yeah. Look, you know, the the RFP flow is actually pretty good given the environment. So the underlying demand is still there. We're not seeing customers decide to no longer do certain programs. You know, we went through a period of reviews and reprioritization of pipelines, which led to very elevated cancellations during the course of '24, maybe 50% higher cancellation levels in '24 than the historic norm.

In the quarter, just I might mention, we had cancellations that were just in the normal historic range. So what happened in the quarter, we expect our booking is mostly, again, programs that clients decided to pause and wait to see what the actual consequences are of some of the administration's pronouncements before they decide to go ahead. And separately, as you might have noted, there was deterioration in the funding for EVP. So we had an unusually high number of EVP awards in the first quarter that were actually not only awards, but they were also contracted, but our policy is not to include those in bookings if we're not confident in the fund or as long as we're not 100% sure that the funding has been secured. Respect the RFP for though, it's still very, very good.

I mean, in we've seen consistent numbers in terms of whether it's dollar value or volume, when our lead rates and hit rates are stable. So we're not seeing any changes really in the flow of RFPs, whether the large pharma RFPs are up stronger than EVPs at this point. It's a good it's pretty good actually. And sequentially, it's high single digits higher. So from that standpoint, I feel better at this point in the quarter than I did at the same point last quarter.

Mike Fiedock, Senior Vice President of Financial Planning and Analysis, IQVIA: Yeah. And as we've mentioned previously, we did very well last year with renewing and expanding all the large pharma, providerships that they went through, and we're starting to see the benefits of those new RFPs from those relationships coming through.

Justin Bowers, Analyst, Deutsche Bank: Thank you.

Conference Operator: We'll go next to Shlomo Rosenbaum at Stifel.

Shlomo Rosenbaum, Analyst, Stifel: Thank you for taking my question. Ari, I want to ask a little bit more just probing on the operating environment. Given the uncertainty what you saw in R and DS, I'm just surprised that you didn't see that in more of the short cycle business in TAS. Like you kept the guidance and I guess the assumption is things are going to continue. But do you think that there's risk that that could spill over into some of the uncertainty into some of those areas in TAS like consulting or some of the analytics or, you know, some of the areas like that?

And could it potentially result in further reprioritization even in the R and D and business? If you give us give us your thoughts on those things.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Yes. I mean, you got to start when you're asking the question. There's considerable uncertainty out there. And whenever you have uncertainty, then obviously, are hesitant to spend money. That's just,

Mike Fiedock, Senior Vice President of Financial Planning and Analysis, IQVIA: you

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: know, that's a general rule. And that's that's the concern out there. But so far, we haven't seen that in past. All of our indicators, leading indicators, pipeline, decision timelines and so on continue to be strong. I believe that the reason we haven't seen that is because there were pent up demand.

We had already gone through the periods of holding back on spend in Taz, starting from the middle of twenty three through the middle of twenty four. And so at that point, drugs that had been approved needed to be launched, and that's what's happening now. So what we're doing, Taz, is support the launch of new drugs, market access, pricing of drugs, supporting commercial commercialization efforts, etcetera. And, you know, that's the day in and day out big day business of of our clients. And, you know, they haven't stopped doing that.

So we haven't seen that. I understand the question, but in the Tiles business, we are seeing continued good growth as expected. And again, believe that the spend has been held back for a while and there is pent up demand and necessary things to do. Now the discretionary stuff, the absolute discretionary stuff, consulting and so on, yeah. I mean, not spectacular.

This is just like flat to mid single digit kind of current level. So it's not that we are looking at spectacular things. So what is being done now is the stuff that was necessary to operate. I mentioned real world before as well as the pent up demand on other things. And that's what's driving that.

So see the environment influencing this much. On the R and D side, yes. Again, because of uncertainty, so you hold back on decisions. The type of reprioritization we saw before were due to the IRA. And I think as we mentioned prior calls, we see that to be largely over.

The reprioritization of pipelines, which led to elevated levels of cancellations that were triggered by certain provisions of the IRA, and I remind you, the IRA was, I guess, at late twenty twenty two, And this process started in 2023. So we are now a couple of good two years after that process started. And we believe that, that reprioritization process of R and D pipeline at large pharma due to the IRA is largely complete. Now, could there be other cancellations? We haven't seen that yet due to new developments.

We don't know. Again, no one really knows the exact impact of what has been signaled by the new administration. The uncertainty has caused delays in decision making. I mentioned in my introductory remarks that the time from receiving the RFP to the actual award has expanded by about 10%, some cases more than that, both year over year and sequentially. So that's an indication, if you will, a high level of measuring, but we know this directly from clients of all as well.

We're planning on making the decision this quarter, but we're going to wait a little bit to understand the implications. No one has signaled that they are not going to do the program, but it's just natural that in an environment of uncertainty, you hold off on making the decision on large capital investments.

Shlomo Rosenbaum, Analyst, Stifel: Thank you.

Conference Operator: We'll take our next question from Michael Ryskin at Bank of America.

Michael Ryskin, Analyst, Bank of America: Great. Thanks for taking the question guys. Just going to follow-up on, I think, Matt's earlier question, talked about cancellations in the quarter already being kind of normal. Maybe I could hone in on book to bill trends. I know you don't like talking about this number quarterly, but just 1.02 in the quarter.

Last year, you called out a few major cancellations across 3Q to be lower. This year, this quarter doesn't seem to be the case. Is really so what do you attribute that number to? Is it really the emerging bio sets that you talked about? How some of the RFPs aren't quite in bookings yet because the funding is not there?

Is that the major swing in the air? And so do you expect to be closer to that 1.15, one point two number for the rest of the year?

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Okay. So I love this question on the quarterly hit to bill. We I mentioned before that awards that should have been contracted in the quarter, the contract wasn't signed and was delayed. So that happened at large pharma a number of times in the quarter, and that's due to this uncertainty, general uncertainty in the biopharmaceutical sector. That's one reason for softer movements.

The second reason, as you mentioned, is the EDP funding. I think you noticed that there are many different sources for what was the EDP funding in a given quarter, but we follow consistently BioWorld's stats. And I think the funding in the first quarter went down to $13,000,000,000 Now $13,000,000,000 is fine, but it's way lower than what we had seen before. And that's an indication, I think, whatever source you look at, you'll see a decline. Again, it's due to the same reasons people are hesitant to commit the funds.

If that happened, that an EVP signs a contract with us and we decide not to include it in the bookings because we're not sure about the funding. But that happens, like, once or twice in a given quarter. Here, we had much larger number of such cases in the quarter. So again, the two reasons all deriving from the same underlying factor, which is the macro uncertainty. You know, blast from up ticking down the signature of the contract to a later period and EDP not confirming that the funding is secure for a contract they've already signed.

And as a result, we do not include that in our bookings. That's what caused the softer bookings in this particular quarter,

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: not the cancellations. Now, again, I

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: mean, I wanna since you break it up and it's my kind of, it's like agitating the red flag in front of the board, I typically react to mentions of quarterly book to bills. Look, we are projecting for our company 5% growth or thereabouts 5.2% for this year. If you focus on the CRO business, we our guide for the year was 4% to 6% for the year, but we see that we have softer bookings. Even if it's at the lower end of that range, the 4% kind of range for R and D S, and that's excluding the step down of COVID business, which is about $100,000,000 year over year. And FX, it's still somewhere around 4%.

Now you look at our sector, there aren't that many benchmarks out there, but we do have a large competitor that's publicly traded and published its numbers. And I looked at the numbers this morning, and it happens to be coincidentally to the exact same book to bill ratios, quarterly or trading twelve months. And yet, they are projecting negative growth. On a comparable basis, I think that negative growth is 5%. So you've got the same exact book to bill ratio, the same exact.

We're projecting about mid single digit growth, positive growth for that segment, and they're projecting mid single digit decline. It's an eight or nine point swing in revenue growth. So if there ever was a proof point that this quarterly book to bill ratio doesn't mean anything with respect to predicting growth and performance, I think that's a very strong one.

Michael Ryskin, Analyst, Bank of America: This set Very

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: It's an interest it's an interesting snapshot picture of what's going on at one given point in time, given circumstances in the world. It's like, you know, we're taking a picture of of a particular horse in the Kentucky Derby in the mud running and you took at the picture and it looks like it's all its muscles extended and doing extremely well. But then when you see the full movie, you see that the the the horse lost the race. So it really doesn't mean very much. It's a snapshot.

It's interesting, but it doesn't tell you those. Or Sorry for that. No.

Michael Ryskin, Analyst, Bank of America: Not at all. Very fair point, Ari. Thank you for that color. Appreciate the context. If I could squeeze in quick follow-up, just any commentary on pricing environment.

Just wondering if there's any change in the quarter given all the macro uncertainty. And again, this is more specific to R and DS. No,

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: no change. Look, I mean, pricing is not enough to level, has not been a lever for some time. So we are the pricing negotiations always are tough. But again, as Mike mentioned earlier, we secured the strategic partnerships with our large pharma clients last year. That was the time at which all the rates were negotiated and so on.

And so I think we are comfortable operating in the current environment. No changes. Thank you. Thanks a lot. Thank you.

Jaylinda Singh, Analyst, Truist Securities: We'll move

Conference Operator: next to Jaylinda Singh at Truist Securities.

Eric Coldwell, Analyst, Baird: Yes. Thank you and thanks for taking my questions. So just given all the recent macro development and uncertainty you flagged, and thanks for all the color you gave Ari, are you guys seeing any change in the RFP or new bookings mix in terms of FSO versus FSP? And one another follow-up quickly, if I can ask. What's the latest two mega trials that were delayed?

Are they expected to resume in second half? Sorry for two parter.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Those three questions. It sounds fine. Thank you very much for the questions. Number one, think you're talking about the the mix, full service versus SSP. And look, we had signals over the course of the prior year that large pharma was sort of doing a little bit more FSE.

And I think we saw this reflected in the RFP flow and in the awards and in the bookings, okay, where FSP as a percentage of total was increasing, okay? We said that in our bookings in the year, was reaching in 24%, close to 20%. Whereas in our revenue, of course, it's lower than that since we're burning revenue related to prior period bookings. In our revenue, SSPs represented in 24% more about 15% to 16%. So obviously, we're trying to do 20%.

However, again, I said before many times that these are pendulum swings. We've seen it before in this industry where large pharma reverts to FSP, decides to insource more of the activity, but then they swing back. And I might you might find it interesting to know that in the quarter, we actually started seeing some signs of this reversal, Okay? Actually in the quarter, SSP bookings represented less than 10 of the total. And we look at our qualified pipeline.

It's in the mid single digits, low single digits. And in the RFP flow, it's about 5%. We actually have very, very strong and exciting pipeline and RFP flow in full service work for Archfarm. And the reason is the reasons are the same as the reasons that have always always led our clients to do more outsourcing, which are basically that they cannot possibly have all the expertise in house. Sometimes they buy an asset in a different therapeutic indication, and they need resources that they don't have in house.

And thirdly, after they've been doing the SSP work and taking more oversight in house, they realize that it can become prohibitively costly to do so over a large number of funds. And invariably, they revert back for any of these reasons to full service. And we're starting to see some signals of that. It's not just a snapshot in this case. It was through the bookings.

It's through the RFP flow, and it's through the qualified pipeline where we see FSP as a percentage of total decline. Think you have another question. The two mega trials. Yes. So the two mega trials we said had been postponed and taken out of the end of last year and pushed back to the back of this year, we received confirmation from one of them, and that's the good news, that it's expected to get started the towards the second half, towards the end of the year as planned.

So that's confirmed. The second one though for reasons that are inherent to the comp the client itself, the same logistics reasons they were facing before was pushed out of the period and won't start this year. And, again, all of that was contemplated in our guidance, and so nothing's changed with respect to our numbers.

Eric Coldwell, Analyst, Baird: Okay. Thanks, Adi.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Any any more color on that? Yes. Just to add

Mike Fiedock, Senior Vice President of Financial Planning and Analysis, IQVIA: a little bit more color on that. So, you know, we are reaffirming our range, you know, with that mega trial pushed out of the period, as Ari said, you know, plus let's see what happens with

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: the bookings environment for the balance of the year.

Mike Fiedock, Senior Vice President of Financial Planning and Analysis, IQVIA: You can conceivably see sort of RDS probably shading more towards the lower end of guidance range, but we'll have to see our BD teams are out there actively working to secure any business, and that's kind of current.

Eric Coldwell, Analyst, Baird: Got it. Thanks guys.

Conference Operator: We'll move to our next question from Eric Coldwell at Baird.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA0: Thanks. I have two, if you don't mind. You might have just partially answered the first one. So I was going to ask about the impact on guidance from FX. And the question was, was there any other change to the guidance or directionality of the guidance excluding FX?

What I'm getting to is during the prepared remarks or maybe the Q and A, Ron said that the year over year gross margin reduction in Q1 was primarily FX, but FX has now turned from a big headwind to a moderate tailwind. So I'm questioning how much, EBITDA and EPS were protected by the FX shift, I. E, would you have, needed to maybe reduce the range on EBITDA and EPS if it weren't for FX? Then you have a moment.

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: No. No. I mean, EBITDA is,

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: you can think of it

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: as being largely independent from the FX ranges. The the impact of FX on EBITDA is very muted. The impact on revenue, obviously, isn't. You saw a big increase in our guidance for the year on revenue, and the the combination of those two reduce our margin, the our implied margin guidance. But yeah.

That's

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: yeah. But but but So

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA0: no no no no, notable impact on EPS then for the year for the fact. No.

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: No. Good.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA0: And then and then my if I can have one more quickly, and apologize toggling like everyone. I toggling multiple calls today, so I'm I might have missed this. I have received a couple of inbound questions from, investors, during the call about, Taz m and a and the m and a impact overall from the firm. So if you address this, I'm sorry, but I am getting some questions on it. I thought I'd throw it out there.

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: There's there's about 200 basis points for the quarter, Eric, and about a 50 basis points for the year. The majority, but not entirely in TAS.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA0: So if if Taz so the question, Ram, was if Taz was the majority, and I don't know if that's, you know, 60% or 90%, but if it was the majority, then mathematically, I believe you could have picked up as much as five points of growth in Taz.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: It wasn't that much. Organic growth in TAS was sort of mid single digits.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA0: Okay. Perfect. Thanks very much.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Low mid single digits. Yeah.

Conference Operator: We'll move next to David Windley at Jefferies.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA1: Hi. Good morning. Thanks for taking my question. I wanted to focus on margin and ask if you could talk about, margin performance by segment. And then on the restructuring activities, the, the expense that you took in the quarter, the add back was a little bigger.

I wondered if you could comment, related to cost takeout, what some of the targets are? Is it still kind of rightsizing headcount or facility consolidation? Or is it something else? And how we should think about those cost takeout again going back to the margin by segment? Thanks.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Yeah. Yeah. Well, look, what we're doing in terms of margins and is essentially to work on our cost structure the same way we've been working on it forever. That is, you know, address the overhead structure as we continue to scale up our business, address, you know, labor arbitrage. We offshore we have offshore centers all over the world for different centers of excellence, for different types of activities, both on the commercial and the RNGS side.

And we continue to shift work different places where it's optimal. And finally, we use technology automation and our AI agents to bring more efficiencies to our processes. Those activities result in the restructuring of headcount, literally all over the world and in both in all segments. So that's what you see reflected in the whole and the structured numbers, but that's the do we talk about margins by segments? I mean, we do we have disclosure of We disclose.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA1: We have

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: have a disclosure segment disclosure on a GAAP basis. There's a look. There's a little there's a little bit more pressure on overall margin in the r and d s segment than there is in the TAD segment. Both had good SG and A performance, a little bit more gross margin pressure in the r and d s segment. Some of that mix related relating to FSP and also increases higher growth in the lab business that tends to be a little bit lower margin.

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: The mix the mix influences margins in the segments. Right? So, know, Real for example, is somewhat lower margin than the rest of the business than the analytics or the data or the technology. And so as a result, when Real World grows faster, you do have a mix impact on margins. That's for the commercial side.

And then on the R and D, as Juan mentioned, FSP and Lab do have lower margin profile than Food Service. And as I mentioned, in our revenues, FSP is a little bit higher, maybe the point in the quarter. In the revenue side, I mentioned earlier that in my commentary on bookings and pipeline and RFPs that it seems to be going the other way now. But on the revenue side, FSP was a little larger in the quarter and lab was a little bit larger. And those two have somewhat lower margin profiles than for service.

So yes, we did have the quarter adverse mix impact on margins. But again, that can fluctuate quarter to quarter.

Michael Ryskin, Analyst, Bank of America: All right. Quickly,

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA1: Yes. I was just saying any any pass through movement as part of that conversation that we should be aware of, pass through change in the revenue composition?

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: Nothing over the long term. Nothing significant. No.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA1: Okay. Great. Thank you.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA: All right. We have time for one more operator.

Conference Operator: And we'll go to Tejas Saban at Morgan Stanley.

Jaylinda Singh, Analyst, Truist Securities: Hey, guys. Thank you for the time here. So I'll ask a quick two parter. Ron, any comments on the stranded costs associated with the mega trial that you that is now pushed to 26? And is there any risk that the second trial, which you just got confirmation on, could slip again in that sort of 4Q timeframe into 2026 as well?

And then Ari, one for you on real world evidence. You called out some of the unique sort of policy driven opportunities for that business over the medium term. Is there anything you're doing either organically or perhaps from an M and A standpoint that could position you to fully capitalize on some of these opportunities that are coming up?

Ron Broman, Executive Vice President and Chief Financial Officer, IQVIA: I'll start, K, just with the, the stranded cost. A little bit of impact, but not a not a huge impact. Obviously, on the trial that got further delayed, you know, we're gonna free up those resources and use them for other purposes. We're not gonna keep them there indefinitely, but there is for the one that's going forward, there is a little bit of impact, not not terribly significant. And well, we can only react to what our customer tells us on the the trial that was further delayed, and we're assuming that it it'll go forward.

Today, the customer still wants to do it, and, you

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: know, we'll fit. Yeah. And the one that's that's starting as planned, we got recent confirmation that that's the plan. So there's no no further news on that or notification of any changes as of today. So that's for that.

What was your question? Real world. Yeah. Well, no. Look.

Real world, I think we are the the the industry will tell you that we are recognized as the leader in the area in this segment. And we intend to fully capitalize on the opportunities that may emerge from any new initiatives from the administration, as I mentioned in my remarks. So I think, again, we are very well positioned here to navigate this sort of turbulent times. I'm very, very confident based on our conversations with clients that the world is not coming to an end and the industry will find ways to adapt. In fact, are many reasons to feel very optimistic.

As I said before, and I repeat again, I feel better at this point in the quarter than I did at the same point last quarter when I look at the metrics, whether it's on the commercial side or on the R and D side. And based on our conversation with clients. So with that Okay. Good. Thank you, everyone, taking the time to join us today.

Cary Joseph, Senior Vice President, Investor Relations and Treasury, IQVIA: Our second quarter twenty twenty five earnings call. The team will be available for rest of the day to take any follow-up questions that you might have. Thank you very much,

Ari Bousvi, Chairman and Chief Executive Officer, IQVIA: and have a good day.

Conference Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.

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